Would price-level targeting destabilise the economy?

A. Patrick Minford, Eric Nowell and Bruce Webb

No E2005/12, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: When indexation is endogenous price level targeting slightly adds to economic stability, contrary to widespread fears to the contrary. The aggregate supply curve flattens and the aggregate demand curve steepens, increasing stability in the face of supply shocks.

Keywords: Inflation; targeting; price-level rule; Price level target; indexation; monetary regime; endogenous contracts; stationarity; stability (search for similar items in EconPapers)
JEL-codes: E31 E42 E52 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2005-12
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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